- As Fitch says Nigeria needs $139 oil price to balance budget
The Federal Government recorded a fiscal deficit of N3.21tn in its operations last year, figures obtained from the Central Bank of Nigeria revealed.
The figures are contained in the Financial Stability Report prepared the apex and released in Abuja on Wednesday.
It stated that the fiscal deficit for the second half of the year, which was put at N1.47tn, was lower than the N1.75tn recorded in the first half of 2016.
These figures, according to the report, are also higher than the budgeted deficit of N1.1tn provided for in the second half of 2016.
The deficit, according to the CBN report, was financed through domestic sources, including issuance of government securities.
The apex bank said the fiscal stance of increased spending to address the challenges of the negative growth (recession) led to higher government expenditure in the second half of 2016.
For instance, it said the Federal Government expenditure grew by 10.3 per cent to N4.02tn in the second half, noting that this was above the N3.65tn in the first half of 2016.
It added that the expenditure figure of N4.02tn was also higher than the budgeted expenditure of N3.12tn for the second half of the year under review.
The report explained that the recurrent expenditure component of the total expenditure accounted for N3.46tn, representing 86.9 per cent; while the capital and statutory transfer components accounted for N264.9bn or 6.6 per cent and N263.4bn or 6.5 per cent, respectively.
The report stated that the Federal Government’s retained revenue for the second half of 2016 increased to N2.55tn, above the N1.89tn recorded in the first half and the half-year budget estimate of N2.2tn.
The increase in the retained revenue relative to the first half, it added, was due to increase in non-oil receipts.
In the meantime, Nigeria is in the worst position among major oil exporting countries in the Middle East, Africa and parts of Europe to have balanced budgets this year, with oil forecast to average $52.50 per barrel, according to Fitch Ratings Limited.
The country needs an oil price of $139 per barrel to balance its budget, the global rating agency said in a report on 14 major oil exporting nations in the Middle East, Africa and emerging Europe.
The forecast break-even oil prices of other African countries, Angola, Gabon and Republic of Congo were put at $82, $66 and $52 per barrel, respectively.
According to Fitch, Saudi Arabia needs an oil price of $74 per barrel; Bahrain, $84; Russia, $72; Kazakhstan, $71; Oman, $75; Azerbaijan, $66; Iraq, $61; United Arab Emirates, $60; Qatar, $51; and Kuwait at $45.
It said even after cuts in government subsidies and currency devaluations, 11 of them would not have balanced budgets this year, including Saudi Arabia, Bloomberg reported on Thursday.
“Fiscal reforms and exchange rate adjustments are generally supporting improved fiscal positions compared to 2015, but have not prevented erosion of sovereign creditworthiness,” Fitch said.
Only Kuwait, Qatar and the Republic of Congo have estimated break-evens that are below Fitch’s oil price forecast for this year.
Kuwait at $45 per barrel traditionally has a low break-even because of its high per-capita hydrocarbon production and more recently its “large estimated investment income” from its sovereign wealth fund, Fitch said.
Brent crude, a global benchmark, has averaged about $55 per barrel this year. It traded around $54.96 per barrel on Thursday.
The rating agency said it “substantially” raised the fiscal break-even prices for Nigeria, Angola and Gabon from 2015 levels because of rising government spending.
Meanwhile, the Nigeria LNG Limited has begun talks with potential buyers on new contracts for gas supplies from its first three production units at its Liquefied Natural Gas terminal, Reuters quoted a senior official of the company as saying.
Contracts for gas supplies from Trains 1, 2 and 3, which together produce nine million tonnes of LNG a year, are being discussed, said the official who requested anonymity. He was attending the Gastech trade conference in Chiba, outside Tokyo.